By R. James Woolsey

WASHINGTON The ruling mullahs in Iran are beginning to look like the inhabitants of the Kremlin in 1988 or of Versailles in 1788 -- the storm that engulfs them may not be here yet, but it is gathering.

The most recent war against us by Muslim fanatics culminated in al Qa’eda's Sept. 11 attacks. But the war began nearly a quarter of a century ago when Shiite fanatics took power in Iran and seized American hostages. It was their proxy, Hezbollah that in 1983 attacked our Marine barracks and embassy in Beirut. The rule of Iran's theocrats has been an unmitigated disaster not only for the victims of their terrorism, but for the Iranian people as well. Now the outside world is beginning to notice what has been chronicled by conservative scholar Michael Ledeen for some months: The mullahs are beginning to lose control.

It is not only that Iranian students have been demonstrating against the regime, workers rioting and the economy collapsing. The ideology of Iranian theocracy is reeling, and this is the trend to watch. Shiite theocracy today is where Soviet communism was in the early 1980s: Still in power, but widely recognized as being rigid and unworkable.

When Ayatollah Jalaledin Taheri, the senior cleric for Isfahan, resigned from the regime early in July, he not only attacked the ruling mullahs for poor governance, he blasted them for betraying Islam. On this point he joined the brave Grand Ayatollah Montazeri, who has been under house arrest for five years, and who recently issued a fatwah against suicide bombers.

The ruling mullahs, who have never numbered more than a small percentage of Iran's Shiite clergy, are finding it harder and harder to get the police and even the Pasdaran ("Guardians of the Revolution") to repress the demonstrators; they have been driven to import Syrians and Palestinians to do dirty work. Knowing that the regime is dying, increasing numbers of the security forces do not want to attack fellow Iranians any more than Polish security forces wanted to attack Solidarity in the 1980s.

It should come as no surprise that Iranians have lost faith in the dysfunctional theocracy that rules them. Union of mosque and state has worked no better there than the union of church and state did in Europe. In the West, religious fanaticism wedded to state power produced, among other things, the Spanish Inquisition and the Thirty Years War. This bloody history created the conviction in the minds of Locke, Jefferson, and the others whose ideas shaped America that social peace requires the separation of church and state. In time, much of the rest of the world has learned the same lesson.

For almost all of its history Shi’ite Islam (although not Sunni) has been on the same side as Jefferson in this debate. Ayatollah Khomeini's 1979 innovation, Shi’ite theocracy, flouted religious tradition and turned Iran down an unaccustomed and disastrous path.

The strangeness of theocracy to the Iranian mind is probably one reason why the ruling mullahs' implementation of repression and censorship, quite unlike the full-bore totalitarianism in neighbouring Iraq, is brutal but not especially thorough

One major lesson from the history of revolutions is that economic privation combined with sporadic and partial brutality quickens the pulses of the oppressed and turns them into committed rebels. Thus pre-revolutionary conditions now exist in Iran.

One of the few public figures who has noticed what's going on is President Bush. The White House issued a fine statement on these developments in Iran on July 12, to almost total press indifference. The Iranian regime responded with a pitiful pro forma anti-U.S. demonstration by rent-a-crowds in Tehran and angry verbal blasts -- sure evidence that the president struck a sore nerve.

By contrast, much of the American media and policy establishment and virtually all of Europe's leaders seem to have bought the notion that President Mohammad Khatami embodies the reform movement in Iran. At times his press in the West suggests that he may have retained the same publicists who sold the goofy idea in the early 1980s that KGB boss Yuri Andropov was going to reform the Soviet Union because he drank Scotch and listened to jazz. It is said that Mr. Khatami holds positive views about America's Founding Fathers. This may be true. Sadly, his behaviour suggests that his favourite would be Cotton Mather, not Thomas Jefferson.

President Khatami has shown himself to be at best the ruling mullahs' poodle. At worst he is a coldly cynical participant in a good-cop-bad-cop act designed to give the Europeans an excuse to do business with Iran in spite of the fact that it exports weapons of mass destruction and sponsors terrorism.

Mr. Khatami's second and final term as president is over in three years, so in the next year or two the ruling mullahs will have to make a big decision. They can try to find someone else they might palm off as an officially acceptable "reformer," but the students and real reformers almost certainly won't buy their choice. The mullahs will thus be driven to increase repression. Their other option is to follow the advice of Ayatollahs Montazeri and Taheri: Abandon the doomed attempt to marry the mosque to the state, and return all clerics to their traditional role outside government.

In the interest of avoiding bloodshed, we should hope that the ruling clerics retire gracefully. But if they continue to opt for deception, oppression, and terror, they will face a major crisis before long -- one in which they are likely to lose everything, including their lives. If we maintain what President Bush rightly describes as moral clarity, we can help Iran take a major step toward changing the face of the entire Middle East.

If theocracy dies in Iran as it has died in Afghanistan, then its remaining advocates -- the Islamist terrorists and Saudi Arabia's Wahhabis -- will be substantially weakened. It is vital that we let the Iranian people know we are with them in this struggle against theocracy. ENDS MULLAHRCHY CRUMBLING 30702

Mr. Woolsey was director of Central Intelligence, 1993-95.

The Wall Street Journal published the article on its 29 July issue

Highlights are from IPS